Excerpts from CGS-CIMB report
Analyst: Lim Siew Khee
Yangzijiang Shipbuilding
■ 9M21 revenue of Rmb11bn and GP of Rmb11bn made up 50%/58% of our FY21F. Expect stronger pick-up in 4Q21F from easing power and Changbo.  ■ Shipbuilding related GM of 14.8% was higher than our 13.8% thanks to qoq improvement in core shipbuilding as well as higher shipping charter rates.
■ Exposure to real estate in debt securities reduced to 26% in 9M21 (1H21: 41%). Catalyst: clarity of listing of debt securities. Maintain Add, TP S$1.91. |
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Expect 4Q21F revenue to pick up
3Q21 shipbuilding revenue w as Rmb3.69bn (+25% qoq, +45% yoy) w ith 15 vessels delivered (2Q21: 11 vessels). We cut our FY21F revenue by 24% to reflect the progress of 9M21 but this is offset by higher gains and provision write-back in debt to securities.
YZJ said the China power crunch led to electricity rationing and production halts at some factories in Sep-Oct, but the impact on its shipyards were under control.
Currently, electricity usage constraints have eased and YZJ’s major shipyards are operating at full capacity. The group delivered a total of 38 vessels in 9M21 and w e think it can hit 55 vessels by end-21 with the resumption of the Changbo yard in Jul 21.
The yard has the capacity to deliver 8 mid-sized vessels p.a. Pre-Covid in 2019, YZJ delivered 59 vessels. Changbo’s capacity is 8 medium sized vessels p.a. and has launched its first vessel YTD.
Stronger shipping GM and higher gains from higher 2nd hand sales
3Q21 group GP was Rmb1bn (+10% qoq, -30% yoy) and 9M21 GP was Rmb11bn or 62% of our FY21F.
Core shipbuilding GM was 13.2%, up from 12.8% in 2Q21. Overall GM of 14.8% was higher than our 13.8% for FY21F, thanks to shipping & others divisions clocking in a GM of 43% (1H: 31%) due to higher charter rates and expanded fleet size (25 units in 3Q21 vs. 23 units in 2Q21).
There was also a vessel gain of c.Rmb40m for the sale of a 82k dw t bulk carrier vs. Rmb25m recognized for a similar vessel sold. . Strong shipping market has led to an uptrend higher secondhand prices (Fig 6).
| Reduction of exposure to property, higher coverage ratio Debt securities balance fell to Rmb10.981bn vs. Rmb16.6bn in 2Q21. Default risk was minimal with a net reversal of impairment of provision of Rmb191m. At 9M21, 26% of its debt securities borrowers were from the real estate sector (1H21: 41%) due to redemption/expiry of tenure. The collateral coverage from land was also higher qoq at 2.9x vs. 2.6x in 1H21. Additional US$740m orders were secured since 1H21 w ith a new US$200m contract w on in Oct for 6 bulk carriers. This followed the US$534m contracts announced in early-Sep. Total orders secured YTD were US$7.41bn; order book stood at US$8.86bn. We expect clarity on the listing of debt securities in the next 2-3 months. |
Full report here.
